When a credit company grants you credit, they also set you a credit limit - the maximum amount of money you can borrow. It depends on your previous credit usage. If you have proved to be a reliable and trustworthy customer, your credit limit will be higher than the limit of customers with bad or no credit history.

Nearly everyone tries to get sufficient credit limits: they let you spend more money without any damage to your credit score. However, having a big limit is not always good for you. It can lead to negative consequences you would prefer to avoid.

Credit limits have several important advantages. For example, they give you more flexibility for purchases and a lot of spending power. Or, they allow credit card issuers to control the amount of money you can borrow. However, it is necessary to realize that a high credit limit can be a serious threat to your successful financial life.

Credit companies can set their cardholders big credit limits immediately (typically for people with good credit) or increase them gradually if they manage the debt well. So if you make regular on time payments and don't overspend, your credit limit will become higher, often automatically, no matter whether you actually need it or not.

Many customers think that a credit limit increase is a signal to make more purchases. And making more purchases can lead to accumulating more debt. So you can end up having a mountain of credit card bills piling up on you. That is the trap of having a big credit limit.

In addition to that, keep in mind that credit bureaus calculate the ratio between your credit card balances and the total amount of available credit. If you borrow too much, the percentage of debt/available credit will increase. It will make your credit score go down. So you need to keep your debt less than 30% of your available credit.

Think twice before accepting offers of credit line increases. If you carry a lot of credit card debt or cannot rely on your credit management skills, then regard open credit lines as a potential chance to overspend. Lenders don't know your financial situation. Only you can decide whether you can afford the additional debt and additional payments.

If you want to decline the increase of your credit limit, you need to contact your credit company and inform them about your decision. Reducing your credit lines will not boost your credit score, but it will show the lenders that you are a responsible customer.

Some people believe that a sufficient credit line will help them make payments after job loss or other life-changing accident. There is one more way to protect yourself: establish a decent savings pot. That way you will always have money to pay for an emergency. Otherwise one day when you need to pull a rabbit out of the hat, you could find that all you have is a dead duck in your pocket. Any amount of cash you can put in a rainy day fund is a good start. Having some cash in reserve is a very important part of managing your money properly.